A comprehensive study of the factors that appear to drive fees in 401(k) and other defined contribution (DC) retirement plans, released today by Deloitte and the
The study, Inside the Structure of Defined Contribution/401(k) Plan Fees, 2013, updates the 2011 survey and looks at total fees charged across a broad sample of 357 employers, representing 361 DC plans with
A key finding of the study is that, for the companies surveyed, the number of participants and the average participant account balance in the plan are drivers of a plan's all-in fee. Specifically, plans with more participants and higher average account balances typically had lower all-in fees, benefitting from economies of scale by spreading fixed administrative costs over more assets and participants.
The percentage of a plan's assets invested in diversified equity holdings was also found to be a driver of the all-in fee. Plans with higher allocations to diversified equity holdings tended to have higher all-in fees as a percentage of plan assets, consistent with the fact that equity investment options generally have higher expenses than other types of investments.
"Consistent with prior years, this study helps to differentiate the factors that drive fees from a number of other plan features that do not appear to have a significant impact on fees for the companies studied," explained Scott Parker, a principal with
Though any individual participant's experience depends on the DC plan offered by his or her employer, the median DC plan participant is in a plan with an all-in fee of 0.67 percent of assets, based on plans included in the study. Across all participants, the all-in fee ranged from 0.29 percent of assets (the 10th percentile participant) to 1.29 percent of assets (the 90th percentile participant). The median annual "all-in" fee per participant was
Graph Omitted (http://www.ici.org/pressroom/news/14_news_deloitte_ici)
"401(k) and other DC plans represent about one-quarter of Americans' retirement assets and play a vital role in Americans' retirement security," said
Though the survey was not intended to provide a statistical representation of the DC plan market, the survey respondents represent a wide cross section of plans. The 361 plans surveyed from June through
To better represent the universe of 401(k) plans, survey responses were weighted to
[Category: Financial Services]
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